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Item 1.01
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Entry into a Material Definitive Agreement.
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On January
14, 2021, Ashford Inc. (“Ashford Inc.”) entered into the Second Amended and Restated Advisory Agreement (the
“Advisory Agreement”), by and between Ashford Hospitality Trust, Inc. (“Ashford Trust”),
Ashford Hospitality Limited Partnership (the “Operating Partnership”), Ashford TRS Corporation (“TRS”),
Ashford Inc. and Ashford Hospitality Advisors LLC (“Ashford LLC” and, together with Ashford Inc., the “Advisor”).
The Advisory
Agreement amends and restates the terms of the Amended and Restated Advisory Agreement, dated as of June 10, 2015, as amended by
the Enhanced Return Funding Program Agreement and Amendment No. 1 to the Amended and Restated Advisory Agreement, dated as of June
26, 2018 (the “Original Agreement”), to among other things, provide for the following revised terms:
Term.
The Advisory Agreement replaces the existing perpetual term with an initial 10-year term, subject to an extension by the
Advisor for up to 7 successive additional 10-year renewal terms which such extensions shall permit either party to elect to renegotiate
the fees to be charged pursuant to the Advisory Agreement.
Termination.
Ashford Trust will no longer be permitted to terminate the Advisory Agreement (i) at the end of each initial or renewal term based
on Ashford Trust’s and the Advisor’s inability to find a resolution on the fees to be charged, based upon the then
current market for such fees or (ii) upon a change of control of the Advisor. Additionally, the Advisory Agreement includes certain
clarifying language, including provisions making clear that in the event a tender offer, voting event or agreement that, upon consummation,
would constitute a Company Change of Control (as defined in the Advisory Agreement) is terminated, any amounts deposited into the
Termination Fee Escrow Account may be disbursed to Ashford Trust.
Subordination
and Deferral of Fees. The Advisor will agree to subordinate its interest in the Termination Fee (as defined in the Advisory
Agreement) to Ashford Trust’s lenders to the extent, on or before the first anniversary of the Advisory Agreement, Ashford
Trust enters into a loan agreement pursuant to which Ashford Trust agrees to pledge all or substantially all of its assets to the
lenders thereunder. Additionally, the Advisor will agree to defer the portion of Base Fees and Incentive Fees (each as defined
in the Advisory Agreement) that exceed 80% of the amount of such fees paid by Ashford Trust to the Advisor for advisory services
rendered during 2019 until the later of (i) 2 years after the date of an applicable loan entered into by Ashford Trust and (ii)
such time as all capitalized interest under the applicable loan has been paid in full.
Payment of Fees.
The percentage used to calculate the Base Fee will be fixed at 0.70% such that the Base Fee payable on a monthly basis will be
in an amount equal to 1/12th of the sum of (i) 0.70% of the Total Market Capitalization (as defined in the Advisory Agreement)
of Ashford Trust for the prior month, plus (ii) the Net Asset Fee Adjustment (as defined below), if any, on the last day of the
prior month during which the Advisory Agreement was in effect; provided, however, in no event shall the Base Fee
for any month be less than the Minimum Base Fee (as defined in the Advisory Agreement).
Peer
Group. The list of peer group members will be revised to remove certain companies which no longer exist.
Liquidated
Damages. Upon a Liquidated Damages Event (as defined in the Advisory Agreement) Ashford Trust shall pay to the
Advisor the Liquidated Damages Amount (as defined in the Advisory Agreement), which amount, less any outstanding amount owed
by the Advisor to Ashford Trust as a result of a judgment plus reimbursable costs and expenses, shall be deemed liquidated
damages and the parties shall have no further obligations under the Advisory Agreement.
Consolidated
Tangible Net Worth. The requirement that Ashford Trust maintain a minimum Consolidated Tangible Net Worth (as defined in the
Advisory Agreement) will be suspended until the first fiscal quarter beginning after June 30, 2023.
Officers.
The concept of a “Designated CEO” was removed, such that in the event the board of directors of Ashford Trust elects
to appoint a chief executive officer who was not an individual made available by the Advisor pursuant to the Advisory Agreement,
such officer made available by the Advisor will no longer entitled to any role or responsibilities with Ashford Trust.
Company
Change of Control. The sale or disposition by Ashford Trust of assets which would constitute a Company Change of Control
was revised in order to provide Ashford Trust additional flexibility to dispose of underperforming assets negatively impacted by
the COVID-19 pandemic. A Company Change of Control will include, from the date of the Advisory Agreement (the “Effective
Date”) until the first anniversary thereof, the consummation of a sale or disposition by Ashford Trust of assets constituting
40% of the gross book value of Ashford Trust’s assets, exclusive of assets sold or contributed to a platform also advised
by the Advisor (but including certain assets which were foreclosed upon or otherwise returned to Ashford Trust’s lenders
during 2020). In addition, Ashford Trust clarified its existing language such that, commencing after the first anniversary of the
Effective Date, the consummation of a sale or disposition by Ashford Trust of assets constituting 20% of the gross book value of
Ashford Trust’s assets over any one-year period, or the consummation of a sale or disposition by Ashford Trust of assets
constituting 30% of the gross book value of Ashford Trust’s assets over any three-year period, exclusive in each case of
assets sold or contributed to a platform also advised by the Advisor, would constitute a Change of Control. Additionally, a change
in the majority composition of the board of directors of Ashford Trust shall no longer be considered a Company Change of Control.
Project
Management Fees. Ashford Trust and the Advisor shall cause the Master Project Management Agreement (the “Master Project
Management Agreement”) dated as of August 8, 2018, by and among TRS, the Operating Partnership, RI Manchester Tenant
Corporation, CY Manchester Tenant Corporation and Premier Project Management, LLC to have a 10-year initial term commencing on
the Effective Date and shall cause the project management and related fees to be paid to Premier Project Management, LLC thereunder
to conform to the predetermined fee schedule attached to the Advisory Agreement.
Certain additional revisions
were made in line with market practice and to more closely reflect the advisory terms between Ashford Inc. and Braemar Hotels &
Resorts Inc.
The summary of the Advisory
Agreement contained in this Item 1.01 does not purport to be complete and is qualified in its entirety by reference to the full
text of the Advisory Agreement, which is filed as Exhibit 10.1 hereto and incorporated by reference herein.